You could say Mattress Firm knows a bedroom community when it sees one.

At the start of 2010, the company didn’t have any stores in Wisconsin. But on July 20, Mattress Firm will open its 16th store in southeastern Wisconsin, in Wauwatosa at 1751 N. Mayfair Road.

It will be Mattress Firm’s 31st store in Wisconsin, meaning it has been opening stores at a rate of nearly one per month. Mattress Firm Wisconsin has become the largest franchisee in the company and says it has the largest market share in Wisconsin.

The company entered the market during a rapidly changing time for mattress sales in the Milwaukee area. Furniture retailer Steinhafels continues to grow its mattress-only stores, with plans to open its first mall stores later this year, and Verlo Mattress Factory Stores is looking to grow under new ownership.

Chuck Dawson, president and majority owner of Mattress Firm Wisconsin, came to the company after serving as senior vice president of national accounts for Sealy Corp., Trinity, N.C. Houston-based Mattress Firm was looking to expand beyond its Sunbelt origins and Dawson was looking for a market that offered opportunities for a specialty mattress store.

Milwaukee was an obvious choice, he said. In most markets, specialty mattress stores have 43 percent of the market share and furniture stores have 38 percent, with other stores picking up the rest of the sales. In the Milwaukee-area market, specialty stores had about 10 percent of the market and furniture stores had double the market share they do nationwide. Local favorites, including Pewaukee-based Steinhafels and Milwaukee-based Verlo, had a strong grip on the market.

“It was tough for a bedding specialist, if you’re not part of a bigger chain, to break into the market,” Dawson said. “We knew that we had the power of Mattress Firm behind us that would allow us to be able to compete.”

The company planned to open 25 stores in its first five years, but it ended up achieving that in two years, he said. However, it was tougher to find real estate in the Milwaukee-area market than Mattress Firm anticipated, so instead it opened stores in areas such as Wausau and Appleton sooner than expected.

It has put stores in many of the Milwaukee suburbs — it doesn’t have any stores in the city of Milwaukee — and plans to open about five more in the area, Dawson said. It plans to grow to about 55 stores around the state.

The company has grown market share quickly because it simplifies the shopping process, Dawson said. It sells most of the major brands and offers a color-coded system: Shoppers sample different types of mattresses and choose the one that feels most comfortable. They are then directed to similar mattresses with the same assigned color, eliminating 75 percent of the products in the store.

Dawson declined to reveal specific sales figures.

GROWING MARKET

Undoubtedly some of Mattress Firm’s market share has come at the expense of competitors, but the market also is growing, Dawson said. The mattress industry grew 7.7 percent nationwide in 2011, with the top 15 bedding producers growing 12.5 percent.

The mattress industry was somewhat insulated from the recession, said Gary Steinhafel, president of Steinhafels. As mattress technology improves, customers are becoming more aware of the importance of sleep and showing more interest in specialty mattresses that don’t include springs, he said.

“People want to sleep on a good mattress,” he said. “I think especially (with) aging baby boomers, there’s certainly interest in getting a good night’s sleep.”

Steinhafels’ mattress business is growing, he said. The company opened eight specialty mattress stores in recent years, mostly in the Milwaukee area. In fall, it will open its first mall stores in Brookfield Square and CherryVale Mall in Rockford, Ill. Those stores will only sell the higher-priced specialty foam beds.

The company has manufactured its own mattresses in the last four years in addition to selling major brands.

Mattress Firm has forced Steinhafels to become more competitive, Gary Steinhafel said. It has improved its staffing model, refined its sales process and is sharing best practices among stores.

Verlo also is holding its own against Mattress Firm, especially since it was bought by Marcus Investments earlier this year, said Scott Baitinger, the retailer’s chief marketing officer.

The company sells custom-built, factory-direct mattresses. It has a different niche from Mattress Firm because it builds a relationship with customers instead of focusing mostly on price, he said.

Verlo has struggled in recent years, shrinking to about 40 stores — 25 of them in Wisconsin — from a peak of 70. But it has increased sales under its new ownership, in large part because of increased marketing that emphasizes the customability of Verlo’s product, Baitinger said.

“We’re trying to really start marketing our unique selling points,” he said. “Since we’re a factory store, we have much more control over the ingredients in the mattress and people’s happiness.”

Milwaukee has become a “mature” mattress market, and the increased advertising by competitors has made people even more aware of new options in mattresses, Steinhafel said.

But the city still doesn’t compare to other metropolitan areas, where several specialty mattress chains often compete for business, Dawson said.

“To everyone in Milwaukee, it seems totally oversaturated,” he said. “If you go to any other metro area, you’ll probably see three times as many specialty stores.”

Associate Editor Stacy Vogel Davis covers retail and tourism for the Milwaukee Business Journal. She also covers restaurant news through her Table Talk blog on The Business Journal website and column in the weekly edition.

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